Kenai Kmart store to close Nationwide retailer to cut 326 outlets, 37,000 jobs

Posted: Wednesday, January 15, 2003

Monday, everything was normal for Bonnie Flynn. The Kenai mother of two left her job for a day off on Tuesday, expecting little would change until she returned.

She was wrong.

"You never know how it goes," Flynn said after learning that the Kenai Kmart, where she is a supervisor, was one of the 326 stores nationwide slated to be closed. "It's a bummer."

Flynn's is among the 132 Kenai jobs that will be eliminated when the retailer closes its doors around March 14.

Tuesday the Kmart Corp. announced that its five Alaska stores would be among those cut in its effort to climb from bankruptcy by April 30. The cuts will affect 932 jobs in Alaska and 37,000 jobs nationwide.

To help ease the transition for affected associates, Kmart will provide a range of benefits including supplemental separation pay, extended benefits, and job placement assistance.

Numbers that Big Kmart will take with its departure:

Big Kmart opened in Kenai July 1993.

The store will close on or by March 14.

Kmart averaged 138 jobs per month in 2001. The store averaged 147 jobs in 2000 and 174 in 1999.

In 2001, Kmart was the 17th largest employer in the Kenai Peninsula Borough.

Average payroll for the third quarter of 2002 was between $750,000 and $1 million.

Kmart paid about $800,000 in sales tax to the city of Kenai in 2001.

Kmart paid approximately $400,000 in sales tax to the Kenai Peninsula Borough.

-- The above figures are based upon information provided by City of Kenai, Kenai Peninsula Borough, and state officials.

The store closings are subject to court approval, as Kmart is due to appear in U.S. Bankruptcy Court in Chicago on Jan. 28.

Company officials said the retailer is undergoing a corporate restructure -- which includes the closures -- to pull itself out of bankruptcy.

''We don't want to remain in bankruptcy a day longer than necessary,'' chief executive James Adamson said in a conference call with reporters.

The Troy, Mich.-based retailer filed for Chapter 11 roughly a year ago and shed 283 stores, affecting 22,000 jobs. Kmart currently operates 1,830 stores in 44 states and Puerto Rico and has about 228,000 employees.

Employees were notified, but Kenai store manager Jim Crist said he was not permitted to comment on the closure.

But city and borough officials said the store's closing will put a damper on sales tax revenue.

"It does make me concerned somewhat for the city of Kenai," said city finance director Larry Semmens. "Taxes that came from Kmart were more than 20 percent of total city sales tax."

Semmens said Kmart was the largest tax account in the city, contributing roughly $800,000 to a total 2001 city sales tax revenue of more than $4.2 million.


Shoppers crowd Kenai's Kmart store during its opening day in July 1993.

Photo by M. SCOTT MOON

Semmens said the absence of the retailer's tax revenue could force property taxes up.

"If all that sales tax attributable to Kmart went away, that represents more than 2 mills of property taxation," he said.

Semmens said tax revenue may not slip, however, as consumers find other outlets to purchase the goods that may have come from Kmart.

"Even if the store closes and we see a loss in taxes, it may not be that much," Semmens said. "There will be some of that critical mass. Other stores may get that business.

"It's a difficult number to figure. It's hard to say how much will go to Soldotna, how much will go to small stores, how much to Anchorage, and how much will go to catalog sales."

Troy Tankersly, the borough sales tax supervisor, said the borough does not stand to lose as big a piece of the tax pie of as could Kenai. The store was the 17th largest employer in the borough and within the top five in the city of Kenai. He said the store contributed about $1.2 million in total sales taxes. Of that amount, the borough received approximately $400,000, or about 1.5 percent of the taxable sales revenue the borough collected in 2001.

"The city of Kenai is definitely going to be more directly impacted," Tankersly said.

Jim Lackey, peninsula terminal manager for Carlile Transportation Systems, said his company delivers between 2,000 and 3,000 pounds of freight to Kmart each week and operates courier service for Unocal from the store. He said the closure will have a significant impact on his business.

"It hurts," Lackey said. "We bring down freight three times a week. We'll have to replace what income is not there."

State labor economist Neal Fried said Kmart was the 17th largest employer in the state and the fourth largest retail employer. He said the statewide impact of the lost jobs will be hard to gauge because other opportunities may present themselves.

"Over the course of the year, there are going to be a number of jobs that are going to be opening up," Fried said. "Of course, at this time of the year, the job market tends to be a little softer."

Kenai Radio Shack owner Treva Kissee said she didn't anticipate much increase in her sales of electronic equipment.

"I think that Kmart and I were pretty separate thing," she said. "Kmart has never hurt me, and it has never helped me. I have my customers, they have theirs.

"What does concern me, they employ quite a few people, and there won't be as many people to spend money. But they probably all shopped at Kmart."

Allan Norville, owner of the Kmart building, declined to comment on any efforts to replace his current tenant. But Kenai Mayor John Williams said plans were in the works that could ease the closing's impact on the city. He said talks with Fred Meyer and Wal-Mart are under way that could mean the building Kmart occupies may not be vacant for long.

"We're not pushing the panic button," Williams said. "Until we understand what all of the player's positions are, we're not going to do anything drastic."

Bonnie Flynn, the Kmart supervisor, said she isn't stressed out over losing her job. Although she is concerned how the closing will affect her coworkers, she said her husband has a good job, and she can afford not to work. Plus, she said she has other options.

"I could always go to Fred Meyer," she said.

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